What is the penalty for taking out the money of my 401k before retirement? Does it vary from company to company?
2007-02-26 08:32:17 · 5 answers · asked by Mike 2 in Business & Finance ➔ Personal Finance
You're going to get whacked with a 10% penalty for early withdrawal, plus owe income tax on the amount withdrawn. There are some special circumstances that would allow you to take money out without penalty, but they're kind of unusual.
Have you considered possibly taking out a loan against the 401(k)? Talk to your plan administrator to see if that's a possibility.
I don't know what your circumstances are that would cause you to go into your retirement funds to pay for something, but seriously reconsider using retirement money to pay for anything except retirement.
2007-02-26 08:41:33 · answer #1 · answered by SuzeY 5 · 0⤊ 0⤋
You generally need to be 59 1/2 to pull out of a 401K penalty free. Otherwise it's about 10% damage to the fund plus 33% taxes. Different companies have different policies but the government sets the guideline rules. If you no longer work for the company you can rollover the fund into another investment vehicle. I know someone who could do that for you if wanted to look into that.
2007-02-26 16:39:50 · answer #2 · answered by silenteagle101 1 · 0⤊ 0⤋
The penalty is 10% if you're under age 59 1/2. There are exceptions for it but those exceptions are death, disability, termination from service after age 55, or take the distribution in installments. You do not get an exception for buying a home, funeral expenses etc etc etc...Those are the only reasons that you can TAKE the distribution if you are still employed.
2007-02-27 12:00:46 · answer #3 · answered by digdowndeepnseattle 6 · 0⤊ 0⤋
If you take money out before age 59 1/2 there is a 10% penalty plus you will owe income tax on the amount you take out. This is the Federal law. No it doesn't matter where you have it.
2007-02-26 16:40:55 · answer #4 · answered by deep5223 4 · 1⤊ 0⤋
All of the other answers reference a 10% penalty in addition to your tax bracket for under age 59 1/2. This is generally true BUT, you may be able to take a loan out and not pay any current tax.
Also depending on your situation and your age, you may not have to pay the 10% penalty (disability, home purchase, death, college tuition)
Once again the answer is not applicable to everyone since everyone's situation is different.
2007-02-26 18:40:18 · answer #5 · answered by dddelapp 2 · 0⤊ 1⤋